Longyear v. Helvering, 6277.
| Decision Date | 18 March 1935 |
| Docket Number | No. 6277.,6277. |
| Citation | 77 F.2d 116 |
| Parties | LONGYEAR v. HELVERING, Com'r of Internal Revenue. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
W. B. McIlvaine and J. F. Dammann, both of Chicago, Ill., for petitioner.
Frank J. Wideman, Sewall Key, L. W. Post, and Robert H. Jackson, all of Washington, D. C., for respondent.
Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.
A petition for the review of a decision of the United States Board of Tax Appeals relating to income taxes assessed against petitioner, John M. Longyear, Jr., for the years 1925, 1926, 1927, and 1929. The decision of the Board is reported in 28 B. T. A. 1086.
It appears that John M. Longyear, the petitioner's father, a resident of Michigan, died testate on May 28, 1922, possessed of a large estate, and his last will and testament was duly admitted to probate in that state. By the terms of his will the testator directed that a residue of his estate composed of both real and personal property should be placed with trustees in trust for the purpose of collecting rents, issues, and profits, with power in the trustees to invest and reinvest, and to sell the corpus, and with directions to distribute the income as well as the proceeds from the sale of the property share and share alike to his children, of whom petitioner was one.
At the time of decedent's death petitioner was married, his wife being Elizabeth B. Longyear, but they were estranged and actually separated from one another.
On November 1, 1922, the petitioner while in Mexico executed and delivered to his wife an instrument of assignment hereinafter called the "Mexican assignment," whereby he assigned to her for her support and the support and education of their two children a one-half part of whatever sums of money due or to become due to him from the estate of his deceased father. Thereafter for a while during 1923 and a part of 1924 payments were made by the trustees of the estate under this assignment to petitioner's wife and children.
In October, 1923, a suit for divorce was filed in the state of Nevada wherein the petitioner was plaintiff and cross-defendant, and his wife was defendant and cross-plaintiff.
On December 20, 1923, petitioner and his wife entered into a written agreement in the state of Nevada which by its terms canceled the Mexican agreement. The Nevada agreement recites in part that it was the intention of the parties to settle all their property rights and to provide for the custody, maintenance, and support of their children, and also to provide for the future comfort, maintenance, and support of petitioner's wife. In order to carry out the purposes of the agreement, petitioner executed an assignment whereby he assigned to each of his two children a one-eighth interest and to his wife a one-fourth interest in "whatever sums of money or other property" might be due or coming to him from the estate of his father, stipulating therein that should his wife remarry after receiving from the trustees of his father's estate the sum of $150,000 in money or property then her right to any further distribution from petitioner's share of the estate should cease upon such remarriage; and that if she should remarry before she received money or property to the value of $150,000 from petitioner's share of his father's estate, then and in that case she should continue after such remarriage to receive such payments as before until the total value received by her should equal the sum of $150,000, and thereupon her right to any further distribution from the estate should cease.
This agreement contained the following provision:
On December 22, 1923, a decree of divorce in favor of petitioner's wife was entered by the Nevada court in the divorce case. The decree dissolved the marriage between the petitioner and wife, and approved the agreement entered into on December 20, 1923, supra, settling the property rights of the parties and providing for the maintenance and support of Mrs. Longyear and the support, education, custody, and guardianship of the two minor children.
Some time after the date of the Nevada decree the executors and trustees of the estate of John M. Longyear, deceased, began to question the validity of the assignments made by petitioner to his wife, and refused to make any further payments under them. Thereupon, on July 7, 1924, petitioner's wife in her individual capacity, and as guardian of the minor children, filed a bill in equity in the circuit court of Marquette county, Mich., asking a decree of the court holding the assignments valid and enforcing the terms thereof.
On December 29, 1925, while the suit was pending, the parties thereto, including the executors and trustees of decedent's estate, and Mrs. Longyear individually and as guardian for the minor children, entered into a written agreement in settlement of the various questions raised in the case. This agreement was duly filed in the circuit court and was approved by the court. The court in its decree held that the agreement of December 29, 1925, was a just and reasonable settlement of "certain good-faith controversies arising in and growing out of the administration of the estate of John M. Longyear, deceased, under his will," and thereupon decreed that all the controversies involved in the action "be and hereby are forever settled, compromised, and adjusted in accordance with the terms of said agreement."
As to Mrs. Longyear the settlement agreement provides for the payment to her by the trustees of the sum of $12,500, and a further sum equal to interest at the rate of 6 per cent. per annum upon $150,000 from the 1st day of July, 1925, to the effective date of the agreement. It also provided for the execution and delivery by the petitioner to her of a note bearing date as of the effective date of the agreement, for the payment to her of $150,000 together with interest at 6 per cent. per annum and payable on or before the 1st day of January, 1945. The agreement was to be made a part of the note by reference on its face. The agreement also provides that "there shall stand as security" for the note a one-fourth part or portion of the share of the petitioner in the estate of his father, and that all distributions from such one-fourth part from and after the effective date of the agreement and until full payment of the principal and interest of the note...
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